The Massachusetts Securities Division has announced that it will conduct an exam sweep of Massachusetts entities engaged in initial coin offerings (ICOs).
In the announcement, released on Friday, Massachusetts Secretary of the Commonwealth William Galvin said that he views ICOs as securities that must be registered with the state.
“Blockchain may or may not change the way banks transfer money or the way credit payments are made, but there is little question that the offer and sale of the digital coins are securities which need to be registered or exempt from registration in the Commonwealth,” Galvin said in the statement.
“With the current frenzy over bitcoin and all the accompanying hype, ICOs are fodder for scam artists trying to capitalize on the craze,” Galvin added. “No one regulator can police this marketplace. My Securities Division intends to patrol these offerings to proactively prevent investor harm.”
The Massachusetts Security Division’s position is unsurprising, given the SEC’s recent statement on ICOs. Although the SEC left open the possibility that some ICOs might not be offerings of securities, the statement strongly suggested that the SEC views many ICOs as security offerings that need to be registered. Indeed, as we recently wrote in this space, the SEC has recently begun shutting down ICOs that it views as running afoul of securities laws.
In Massachusetts, Galvin has taken a skeptical approach toward cryptocurrencies. Earlier last week, Galvin released another statement warning investors to avoid “Bitcoin mania.”
“Bitcoin is just the latest in a history of speculative bubbles that most often burst, leaving the average investors with a worthless product,” Galvin said. “Going back to the 1600s with tulip mania to the present Bitcoin craze, chasing the next best thing will, more often than not, end in disaster for the average investor.”
This blog will continue to monitor regulatory activity in the ICO space, including potential enforcement actions by the Massachusetts Securities Division against in-state ICOs.